GHIT Notebook

May 12, 2008

Will health IT budgets get whacked?

By Brian Robinson

The economic slowdown in the United States has so far not affected states’ plans for health information technology. And it probably won’t if a recession is as short and mild as many economists are predicting.

The salient term is “if.” Most states reported an increase in revenues in 2007, though there was a notable slowing toward the end of the year. The Rockefeller Institute of Government said the 2.3 percent average growth in state tax revenues in the fourth quarter of 2007 was the lowest since the first quarter of 2003.

However, at the beginning of this year, states were still planning for an overall 2.9 percent increase in budgets in fiscal 2008, according to the National Association of State Budget Officers.

Most states recognize health IT’s potential for helping to control and even reduce health care costs while improving the care citizens receive.

At the end of March, Pennsylvania Gov. Ed Rendell signed an executive order establishing the Pennsylvania Health Information Exchange, a core component of his Prescription for Pennsylvania health care reform plan. The exchange would decrease the number of duplicative tests, reduce the time it takes doctors to access patient records, and improve the way information on diseases and other vital data is reported, Rendell said.

Other governors have made similar commitments or have indicated an interest in doing so. Market researcher Input said recently that the number of governors who mentioned health IT in their state-of-the-state speeches almost doubled this year compared to 2007.

So far, states have not had to spend a lot of money on health IT projects. Much of the initial funding has come from the federal government and industry partners, and the amount states have committed is relatively small.

Minnesota and Missouri — two of the more aggressive states when it comes to health IT — have tagged just $18.5 million and $15 million, respectively, for such projects in their 2008-2009 budgets.

Because they represent such minimal amounts, states’ health IT budgets are probably safe, even during an economic downturn, said Stephanie Jamieson, issues coordinator at the National Association of State Chief Information Officers.

“I just can’t see them taking those to the chopping block,” she said.

But it’s not a completely safe scenario. The National Governors Association is tracking at least six states — Arizona, California, Florida, Michigan, Nevada and Ohio — that it believes are already in a full-blown recession. California and Florida in particular have been major backers of health IT.

Like Jamieson, NGA Executive Director Ray Scheppach said he thinks most states won’t cut health IT spending, particularly because they anticipate potential savings in the future. But even relatively small health IT budgets could be threatened in states under the heaviest economic pressure if a downturn continues for some time, he added.

Some states might not be waiting to see what happens. Input said Arizona’s budget only contains $275,000 for health IT.

It could be some time before the health IT budget picture clears. States typically don’t feel the full effect of a national economic downturn until sometime after the event. The dot-com bust happened in 2000 and 2001, for example, but states didn’t see the resulting hit to their budgets until a year or two later.

So, although the downturn isn’t considered any great threat yet to states’ health IT activities, the potential exists. It’s now a matter of waiting to see what happens.

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